Consistent Demand Kept Market Tight in Q3
Analysis provided by CB Richard Ellis’ Global Research and Consulting.
Moderate but consistent demand for research-and-development space in Or-ange County has kept the market tight, with single-digit availability rates through the slowing of the real estate market. The R & D; market experienced its first vacancy increase since the first quarter of 2000, to 3%, in the third quarter. However, due to positive activity at the end of 2000 and earlier in 2001, the vacancy rate still was 12% lower than the 3.4% rate in the third quarter of 2000.
The third quarter of 2001 also marked the first turn of absorption in the R & D; market to negative territory since the beginning of 2000, to a negative 217,944 square feet. Although leasing activity dropped 27% in the third quarter, sale activity more than doubled in the quarter to 131,675 square feet, keeping the overall gross activity at 449,706 square feet, 9% below the gross activity of the previous quarter.
Larger available spaces in the R & D; market are still hard to come by. As of the end of the third quarter, only 23 spaces marketed as available for lease or sale were larger than 50,000 square feet. Consequently, the majority of lease and sale activity during the third quarter took place in spaces smaller than 30,000 square feet. Only two leases in the quarter were for more than 90,000 square feet, one in Cypress and one in the Irvine Spectrum.
After doubling in the second quarter, R & D; construction nearly doubled again in the third quarter to a total of 532,825 square feet. While construction wrapped up on seven new buildings in the third quarter, adding approximately 135,260 square feet to the industrial base in Orange County, five new buildings commenced construction to add more than 370,000 square feet to the construction activity. Of the buildings that broke ground in the third quarter, one 270,000-square-foot facility in Anaheim, and one 64,904-square-foot facility in Cypress will offer larger spaces in the R & D; market upon completion. Also started during the third quarter were three buildings at the Bunsen Corporate Center in the Irvine Spectrum, which will add a total of 36,222 square feet to the market.
